New year, same ‘extreme fear’ — 5 things to watch in Bitcoin this week

Bitcoin
(BTC)
begins
its
first
full
week
of
2022
in
familiar
territory
below
$50,000.

After
ending
December
at
$47,200

far
below
the
majority
of
bullish
expectations

the
largest
cryptocurrency
has
a
lot
to
live
up
to
as
signs
of
a
halving
cycle
peak
remain
nowhere
to
be
found.

With
Wall
Street
set
to
return
after
stocks
conversely
ended
the
year
on
a
high,
inflation
rampant
and
interest
rate
hikes
looming,
2022
could
soon
turn
out
to
be
an
interesting
market
environment,
analysts
say.

So
far,
however,
all
is
calm

BTC/USD
has
produced
no
major
surprises
for
weeks
on
end.

Cointelegraph
takes
a
look
at
what
could
change

or
continue

the
status
quo
in
the
coming
days.

Stocks
could
see
six
months
of
“up
only”

Look
no
further
than
the
S&P
500
for
an
example
of
the
state
of
play
when
it
comes
to
United
State
equities.

The
index
achieved
no
fewer
than

70
all-time
highs

in
2021,
rounding
out
the
year
with
a
flourish,
even
as
risk
assets
looked
far
less
appetizing.

Bitcoin
was
among
them,
trailing
below
the
$50,000
mark
with
the
only
noticeable
events
coming
in
the
form
of
peaks
and
troughs
around
thin
holiday
liquidity.

With
that
said,
central
bank
policy
is
widely
tipped
to
provide
a
potential
cat
among
the
pigeons
in
the
coming
months.
The
U.S.
Federal
Reserve
has
signaled
two
interest
rate
hikes
this
year,
and
the
market’s
ability
to
absorb
them
is
seen
as
a
key
test
for
asset
performance.

For
the
first
chunk
of
the
year,
however,
it
may
well
be
a
continuation
of
the
latest
flavor
of
“business
as
usual”

stocks
adding
to
all-time
highs.

“History
suggests
the
beginning
of
rate
rise
regimes
actually
result
in
stock
market
strength
for
6
months,”
Charles
Edwards,
founder
of
asset
manager
Capriole,

noted

in
a
series
of
tweets
this
week.

“10
of
the
13
regimes
(77%)
since
the
1950s
had
positive
stock
market
returns
over
the
first
six
months,
averaging
+5.1%.
We
are
approaching
the
start
of
a
new
regime
now.”

Edwards
said
that
while
such
circumstances
are
generally
“good”
for
Bitcoin,
upheaval
further
down
the
line
would
likely
mean
that
stocks
take
a
beating
in
the
long
term
thanks
to
the
rate
hikes.

“Without
significantly
higher
economic
growth
(yet
to
be
seen),
it
is
unlikely
any
rate
rise
programs
by
the
Fed
will
have
a
long
runway,”
he
continued.

“Bitcoin
will
be
volatile
in
this
period,
both
an
effect
of
stock
market
volatility,
but
also
from
sharp
Fed
course
corrections.”

Inflation
will
be
on
the
radar
again
next
week,
with
Jan.
12
scheduled
for
the
latest
U.S.
consumer
price
index
data
for
December.


U.S.
inflation
chart.
Source:
Trading
Economics

$40,000
stays
support
floor

Bitcoin
spot
price
action
has
provided
precious
little
by
way
of
interesting
cues
lately,
staying
in
a
well-defined
range.

A
tussle
between
bulls
and
bears
has
in
fact
been
somewhat
underwhelming
in
nature
beyond
rhetoric
found
on
social
media

volumes
are
thin,
interest
from
retail
is
low,
and
large
players
continue
to
maintain
sell
levels
nearby.

Responding
to
levels
to
watch
from
Cointelegraph
contributor
Michaël
van
de
Poppe
Sunday,
popular
trader
and
analyst
TechDev

agreed

that
$48,000
represents
“a
little
brick
wall.”

To
the
downside,
van
de
Poppe
said
that
he
was
eyeing
the
area
between
$40,000
and
$42,000,
with
action
above
that

corresponding

to
“accumulation.”

Bitcoin,
however,
has
a
habit
of
upending
even
the
strongest
trend
at
the
least
expected
moment.

For
fellow
trader
Pentoshi,
there
is
little
cause
for
celebration
at
levels
much
below
$60,000,
these
last
appearing
over
a
month
ago.

“I
will
long
logical
areas
in
a
downtrend.
I
will
be
macro
bearish
until
58-60k
reclaim.
And
bullish
at
local
areas,”
he

summarized

about
his
position
over
the
weekend.

Pentoshi
and
others
urged
a
pivot
to
Ether
(ETH)
on
the
basis
of
altcoin
strength,
thus
providing
a

convenient
way

to
“de-risk”
with
Bitcoin
underperforming.

That
strength
is
captured
in
Bitcoin’s
market
capitalization
dominance,
which
has
now
slipped
under
40%
for
the
first
time
since
May,
data
from
TradingView
shows.


Bitcoin
dominance
1-week
candle
chart.
Source:
TradingView

On-chain
metrics
predict
“sustainable
price
trend”

For
those
looking
for
a
silver
lining
to
the
uninspiring
price
action,
on-chain
metrics
provide
no
shortage
of
relief.

The
further
away
the
market
gets
from
last
month’s
snap
correction,
the
more
enticing
Bitcoin
looks
as
an
investment
punt
based
on
historical
trends.

In
its
latest

newsletter

issued
Dec.
31,
Capriole
director
Ryan
McCoy
highlighted
the
shifting
tide
in
investor
selling
habits
as
aligning
with
the
latter
stages
of
previous
corrections.

Of
particular
interest
is
the
short-term
holder
spent
profit
output
ratio
(SOPR)
from
on-chain
analytics
firm
Glassnode,
which
shows
the
extent
of
gains
or
losses
from
recently
spent
coins

specifically
those
that
last
moved
in
the
past
155
days.

Currently,
with
a
median
score
below
1,
SOPR
shows
that
coins
spent
at
a
loss
are
declining
in
numbers

a
potential
form
of
seller
exhaustion.

“Typically,
when
this
metric
starts
to
bottom
and
then
rise,
a
more
sustainable
price
trend
has
begun,”
McCoy
explained.

“The
30-day
median
is
still
below
1
(implying
that
the
average
price
of
the
coins
moved
is
lower
than
the
price
they
were
purchased
at),
but
signs
of
life
like
this
after
a
substantial
corrective
event
suggest
we
are
likely
in
the
latter
stages
of
the
current
correction.”


Bitcoin
short-term
holder
SOPR
(30-day
moving
average)
chart.
Source:
Capriole

Cointelegraph
has

reported
extensively

on
hodlers’
habits
when
it
comes
to
BTC,
and
long-term
investors
remain
steadfast
in
their
conviction
not
to
sell.

“Despite
the
-38%
drop
since
November,
Long-Term
Holders
continue
to
diamond
hand
Bitcoin,”
McCoy
summarized.

“The
last
time
Bitcoin
was
at
$47K,
long-term
holdings
were
10%
lower.
To
date
there
has
been
insignificant
distribution
despite
the
volatility.
That’s
bullish.”

Fundamentals
have
(almost)
never
been
better

Continuing
the
positivity,
network
fundamentals
underscore
the
strong
belief
of
another
cohort
of
essential
Bitcoin
market
participants.

Miners,
despite
seeing
all-time
highs
of
$69,000,
are

accumulating
,
not
selling,
their
coins.

At
the
same
time,
the
network
hash
rate
is
at
all-time
highs
of
its
own,
these
last
seen
in
March
and
April
before
the
upheaval
of
the
Chinese
ban
sparked
months
of
migration.

Should
the
old
adage
of
“price
follows
hash
rate”
remain
true,
miners’
faith
in
the
long-term
profitability
of
Bitcoin
provides
a
key
indicator
of
where
the
market
is
going.

“Metrics
like
this
are
effectively
old-guard
fundamental
outlook
material
and
are
largely
overlooked
by
newer
and
sexier
methods
of
explaining
price
dynamics,
supply
and
demand,
but
cannot
be
ignored
for
their
ability
to
explain
institutional
and
infrastructural
support
for
securing
the
protocol
that
at
this
point
effectively
underpins
the
entirety
of
the
crypto
economy,”
Capriole
added.


Bitcoin
hash
rate
chart.
Source:
MiningPoolStats

The
hash
rate
is
currently
over
190
exahashes
per
second,
according
to estimates from
MiningPoolStats.

Later
this
week,
meanwhile,
Bitcoin’s
network
difficulty
is
set
to
increase
by
around
2.4%.


Bitcoin
difficulty
chart.
Source:
Blockchain.com

This
reflects
the
competitiveness
of
the
current
mining
landscape,
and
difficulty
should
shortly
tackle
25
trillion
again
for
the
first
time
since
the
pre-China
peak,

data

from
Blockchain.com
shows.

With
every
increase,
difficulty
reinforces
network
security,
creating
an
even
more
robust
ecosystem.

How
sustainable
is
“extreme
fear”
this
time?

Bitcoin
sentiment
began
2022
with
serious
cold
feet,
the
Crypto
Fear
&
Greed
Index

measuring

“extreme
fear.”



Related: Top
5
cryptocurrencies
to
watch
this
week:
BTC,
LUNA,
FTM,
ATOM,
ONE

As
Cointelegraph
reported,
investor
emotions

have
become
highly
sensitive

to
even
smaller
price
movements
within
the
current
range.

Fear
&
Greed
reflects
this,
moving
up
eight
points
since
the
weekend
despite
price
action
offering
little
change.

At
the
time
of
writing,
the
Index
measured
29/100,
nevertheless
in
the
“fear”
zone.


Crypto
Fear
&
Greed
Index.
Source:
Alternative.me

As

noted

by
on-chain
analytics
resource
Ecoinometrics,
meanwhile,
such
sentiment
has
historically
failed
to
play
out
for
long.

“Bitcoin
is
back
in
extreme
fear.
Historically
that
means
there
is
limited
downside
at
30
days,”
it
tweeted
alongside
a
chart
compiling
the
index
and
BTC/USD.


Crypto
Fear
&
Greed
Index
vs.
BTC/USD
chart.
Source:
Ecoinometrics/Twitter

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